How to structure incentives and bonuses for a highly-motivated, goal-aligned sales team
By Desirée Grace
The competition is trying to poach one of your top players.
Another superstar is threatening to leave.
Your top two are wrangling over territories and making the John Cena gesture at each other in sales meetings. It’s as bad as the recent NCAA drama. What’s a leader supposed to do?
Well, there’s a lot you should be doing.
- Ensure your assigned territories make sense.
- Align your compensation with your strategy and market.
- Lead by example and behave professionally.
Let’s tackle another aspect of leading salespeople to championship performance: incentives and bonuses.
Salespeople are coin-operated. Not that other aspects of their role don’t motivate them, but money really motivates them. So does customer satisfaction, the thrill of the chase, and beating the competition out of an order.
However, for now, let’s focus on sales incentives and best practices. The primary purpose of the incentives is to MOTIVATE your sales team. Think of Caitlin Clark as she was going after a national championship. You want RESULTS. These results can be revenue growth, new customer acquisition, new product launches, cross-selling, or other important initiatives. Some salespeople may view incentives as an entitlement. If that has been a past practice and cultural norm at your organization, now is the opportunity to change that. Your benchwarmers need to contribute, too. As you design your incentives, keep in mind the primary purpose of MOTIVATION. Your process should include:
- Simplicity and ease of understanding
- SMART goals
- Trackability and transparency
- Communication and timing matter
- Alignment with overall organizational goals
- Fact-check for the unintended consequences
- Any “governors” necessary to prevent bad behavior
Let’s break those down.
Simplicity and ease of understanding ensure your team stays focused on the goals and is not distracted by complex mathematics. If they need to phone a friend for help with the calculations, you need to simplify. Someone who majored in underwater basket weaving should be able to manage the math.
If the goals need more than the incentive scheme can address, consider moving some of those goals to the annual performance review.
Prioritize the most important aspects of the sales function and build them into the incentive scheme.
Goals should be SMART: Specific, Measurable, Attainable, Relevant, Time-Bound. When writing the goals, if they don’t pass the SMART test, revise them until they do.
Trackability and transparency are important if you want your team to trust the incentive scheme and your organization. Tracking team results will keep them motivated and help them consistently see the results of their hard work, much like thrice-weekly trips to the weight room.
If your internal systems don’t support monthly or quarterly tracking, fix them so they do. You can always go old school and provide manually generated reports. Otherwise, that headhunter will come calling. Nothing lures recruiters better than an opaque incentive plan.
Communication and timing are an important part of your incentive strategy. Best practices include rolling out the incentive plan BEFORE the start of your fiscal year. Would a winning coach tell their team the goals halfway through the season? Of course not! Hold a Q&A with the sales team so they can ask questions and clarify any potential misunderstandings. Offer examples of the incentive plan and how it works. Think of it like a playbook – letting your team know how they will win the trophy.
Alignment with overall organizational goals matters. If you want the team rowing the boat in the same direction at the same speed, ensure the incentive scheme aligns. For example, if you want the team to focus on demand generation, and end-user spec position, reward them for end-user sales and pull those accounts through your distributor partners. (Apologies for moving from basketball and football analogies to one for the crew and rowing fans out there, but I do try to address multiple sports fans.)
The importance of fact-checking for unintended consequences cannot be underestimated. If you cap your incentives, for instance, you might find salespeople taking their foot off the gas once they hit their target.
Is the ability to sandbag created by your incentive?
Involve a salesperson or two to evaluate the incentive and provide a safe environment for honest feedback. Trust me on this one – some smarty-pants on your team will find the loopholes and tell all their friends. (This would be the one who attended all their classes in undergrad.) Within seconds, the team will have texted each other all about the loophole.
Given the reality of human behavior, your next step is to ensure you have governors in place to prevent bad behavior. Just as we don’t want beer-soaked golfers driving their cart 50 MPH across the fairway, we don’t want your team selling at the expense of other important metrics. Maybe you want your team to maintain gross margins. Your incentive scheme should clearly state this. If incentives will not be paid if the territory margins drop below X, make sure they understand that.
Again, involve a salesperson or two to analyze and evaluate the incentive. This should be an experienced member of the sales team, not one of your new hires. Someone you trust, and someone the others trust. Who is the Patrick Mahomes on your team?
Finally, and most importantly, do what you say you will do.
If you want to retain your top talent, pay what you commit to promptly. One of the very best ways to push your talent out the door is to play fast and loose with the incentive results. If your stretch goal is 110% of the target, and your salesperson meets that 110%, pay them. ON TIME.
The payoff for the above is a motivated sales team focused on the right goals, aligned with the organization, and working with their colleagues and customers in a structured, disciplined way, passing, blocking, and scoring those points – to win the game and meet or exceed the organizational goals.
You want to keep these salespeople.
Those who don’t consistently achieve a bonus, without good reason, will be exposed as those who need coaching – up or out. That is a good thing, as you need a clear view of your sales team and their capabilities. A well-designed incentive plan brings out the best in your top performers and elevates your organization to new heights. It also helps you retain your top talent. Now, go win big, bring home the trophy or medal, celebrate with a parade, and keep the best players so you can do it all again next year.
Desirée Grace is an advisor, consultant, and mentor with 30+ years as a senior leader in the electrical distribution and manufacturing sectors. She builds brands, grows revenue and motivates teams, facilitates strategy and execution, and offers special expertise in helping offshore companies enter the North American market. Find her on LinkedIn at www.linkedin.com/in/desireecgrace.
INDUSTRIAL SUPPLY MAGAZINE
The November/December issue of Industrial Supply magazine features an in-depth cover story about Kimball Midwest. Plus, we're featuring articles by contributing writers Dirk Beveridge, Frank Hurtte, and Mike Marks, as well as interviews with numerous product and distribution industry experts.
